New PayPal Benchmarks Alert Sellers of Risky Behavior

PayPal treats sellers who issue "too many" refunds or who get lots of chargebacks as high risk. In discussing new seller Performance Benchmarks - as yet unannounced - the head of the Risk Design team at PayPal Russell Bauder wrote on his personal blog, "We must keep good tabs on seller performance, or else risk going out of business ourselves."

PayPal is launching the new feature as a way to warn sellers if their performance metrics indicate potential problems. The three metrics are Dispute Rate; Refund rate; and Average refund time. PayPal also displays "Average transaction price" and "Average monthly volume."

A PayPal spokesperson confirmed that this is a limited beta test being used by a select number of PayPal users. "We are not providing details at this time but will follow up once we have anything to share."

A seller who spotted the new benchmarks on his account said one of the PayPal graphs looked eerily similar to eBay's DSR graphs. eBay, the parent company of PayPal, allows buyers to leave anonymous feedback about specific aspects of their transactions, called Detailed Seller Ratings, which eBay then uses to incent sellers. For the seller's reaction to the new PayPal benchmarks, see the EcommerceBytes Blog.

According to the PayPal website (visible to those who are part of the beta test), the new PayPal Performance Benchmarks are designed to "help you improve your business practices and understand our expectations for your business. We track key metrics, help you analyze the information, and let you know if we see room for improvement. You'll have the information you need to make your business a success. We'll help you track things like:

What percentage of your payments are disputed;

How many refunds you issue;

How quickly you issue refunds."

PayPal explains to sellers that they can compare their metrics to "industry benchmarks and get an idea of how satisfied your customers are."

According to Bauder's personal blog post, PayPal's president wants the company to be better at how it conducts its payment holds. "We take action on sellers that demonstrate poor performance. If you get too many chargebacks, we might starting holding some of your funds in reserve. People obviously hate this practice, and we get bad press for it, but it is necessary to cover losses. Our President has said we need to get better at how we do this, and I wholeheartedly agree."

Also, according to Bauder, the product manager involved in the benchmark design project wanted to "provide low, medium, and high warnings to the seller; include six different metrics that we track (like chargeback rate, refund rate, etc.); include info about all reserves, limits, or holds the seller might have; and have a sub-page where the seller could look at trends and informational content."

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.

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